Wednesday, March 20, 2013

Positive impression. Q3 orders of Y95bn for SPE/FPD were up 27% QoQ, above
the firm’s original guidance of “slightly up”, owing to strong Taiwan foundry
and US (MPU and Korean maker with US factory) orders. Memory capex is sluggish
from Samsung, Toshiba, etc., but could pick-up for NAND flash in the 2H of
2013. TEL projects -10% YoY capex for CY2013 as both memory and logic-related
capex remains sluggish. This appears slightly conservative with more upside
potential than downside risk. Other upside catalysts for FY3/14 are NEXX
systems, a recent high growth acquisition into back-end equipment (packaging),
and the improvement in price competitiveness as the yen weakens. TEL is
arguably the overall winner versus foreign and domestic rivals given its recent
FOREX advantage against AMAT and Lam Research, large size and deep pockets
against DNS, Hitachi, etc., which will be tested on the 450 mm wafer platform.

SPE orders: About 2/3 of Q3 orders were from Taiwan and USA, mainly from
TSMC, Intel, and Samsung Texas plant in the USA (memory and logic). Korea and
Japan are very sluggish owing to weak memory capex. Samsung is building a China
NAND flash plant for 2014 production. The China project will cost about $7
billion, and Samsung will invest $2.3bn initially in the Xi’an plant, Suwon. The
Chinese plant, where 10-nano class NAND flash memory chips are planned to be manufactured,
would be able to produce 100,000 wafers of 12-inch size per month.

450 mm outlook/impact on TEL:

TEL believes it could gain market share to Intel in various tools
including thermal processing, etch, and clean tools. This excludes the
coater/developer, which they already have 100% market share. Intel is driving
the 450 mm research along with Samsung and TSMC. Prices could rise 30-50% for
450 mm tools, as they did when wafer size shifted to 300 mm from 200 mm. In
1997-2003, during the last shift to 300 mm, TEL’s profits improved
significantly, although there were various positive external factors absent
today. However, profitability was actually better in 2005-2008 versus 1998-2001
despite the lack of wafer size change in 2005-2008. We believe it will be at an
advantage given its large size versus rivals DNS, Hitachi Kokusai, Tokyo
Seimitsu, ASMI (atomic layer deposition), etc. AMAT and Lam are also large though.
All tools on a 450 mm line must be redesigned for 450 mm wafer size.

Sunday, March 10, 2013

On the 2 year anniversary of the Tohoku earthquake, we bring greetings from the ground in Tokyo. On this sunny spring Monday, stock markets continue to be frothy particularly in Japan and the US, hitting all-time highs in the US and 5-year highs in Tokyo. We deem it appropriate to pass on the following comparison, with thanks to David Rosenberg:THEN AND NOW...Lots of things have changed since the last Dow Jones peak in 2007:Dow Jones Industrial Average: Then 14164.5; Now 14,304GDP Growth: Then +2.5%; Now +1.6%Unemployed: Then 6.7 million; Now 13.2 millionFood Stamp users: Then 26.9 million; Now 47.69 millionFed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillionDebt as a Percentage of GDP: Then ~38%; Now 74.2%Total US Debt: Then $9.008 trillion; Now $16.43 trillionConsumer Confidence: Then 99.5; Now 69.6VIX: Then 17.5%; Now 14%10 Year Treasury Yield: Then 4.64%; Now 1.89%Gold: Then $748; Now $1583NYSE Average daily volume: Then 1.3 billion shares; Now 545 million sharesBack to chips and dips in Tokyo, we visited 3 companies last week (Nikon, TEL, Docomo), and will see Sharp, Horiba, and Omron this week. Below is our full line-up for this month.

Nikon: neutral impression

Tokyo Electron: positive impression

NTT Docomo: neutral impression

Sharp (6753)

Horiba (6856)

Omron (6645)

Nihon Kohden (6849)

Miraca (4544)

Ushio (6925)

As you can see, we've added some medical-related names this time around, given their strong performance and the favorable demographics for medical industry in Japan. Omron/Horiba have large indus. equip. biz's,

but medical equip biz is attractive and gaining importance. We'll give more color on all the visits later this month.

For those interested, another super day was had at the Tokyo marathon: